Working Papers

Policy White Paper

(V1.0) April 16, 2005 (working
paper)

Executive White Paper
By
Med Jones, International Institute of Management

1) What is
Virtuous and Vicious Economic Cycles Theory?

Over the long term, if government revenues continue to be
more than expenditures (surplus), then the economic health of the country
improves, because the government can afford to invest in development
projects such as research and development, education and infrastructure.
With more income, the government can also afford lower taxes, thereby
increasing corporate profits and attracting more foreign investors, resulting
in more economic activities, creating more jobs and enlarging consumer
spending and government revenues despite income tax cuts. It is what I call
a virtuous economic cycle.

Over the long term, if government revenues continue to be
less than the expenditures (deficit), then the economic health of the
country worsens because this will result in accumulated debt. An increasing
government debt will result in higher interest payments, and less money
available for socioeconomic development. To pay for the debt, the government
will have to raise taxes, which will reduce the competitive position of the
country in the global economy and chase investors away resulting in less
economic activities and more job losses. In order to avoid higher
unemployment and social instability, the government has to raise more debt
to fund spending and welfare support by raising the interest rate which will
increase the cost of money, reduce corporate profits and slow economic
investments, thus resulting in more job losses and reduced government
revenues, despite income tax increases. It is what I call a vicious
economic cycle.

2) What is the
Application of
Virtuous and Vicious Economic Cycles Theory?

How to balance between government spending, debt and taxes?
How to use theory to create a tax policy and government budget
framework?

How tax revenues can be used to increase competitiveness
instead of burdening the businesses and slowing the economy? The allocation
of government spending for investing in growth industries vs. spending for
welfare?

How government and private sector innovation can replace the
need for increasing taxes?

Can the government reduce taxes and at the same time
increase its revenues? How?

Is a sales tax policy better than income tax policy? What is the impact on
the economy and how they affect each cycle?

What global, external and internal policies, actions, and
events enforce each economic cycle?

How to use theory as a socioeconomic policy reform tool?

How to influence the cycle via the introduction or change in
internal and external forces, such as innovation, financing, human capital and other
economic production factors?

How to apply the concept in microeconomics context to help
develop competitive national industries and companies?

How to reverse a vicious economic cycle?

How to sustain a virtuous economic cycle?

How to measure the momentum of each cycle?

How the size of an economic sector or industry, such as real
estate, finance, and technology can impact the economy? In which cycle
direction and to what degree?

What is the impact of the formation and busting of asset
bubble on each economic cycle?

Is China entering a virtuous economic cycle?

Is the U.S. entering vicious economic cycle with its increasing
investment, trade and budget deficits?

How is the expansion of the European Union
affecting their economic growth and decline cycles? How is the demographic
growth rate and composition affecting taxes, welfare and the competitiveness
of EU businesses? How is the increase in consumer base and production bases helping the virtuous cycle? How
are the debt and tax policies of some of the
EU countries hurting the virtuous economic cycle?

3) The "Balance of Powers"
Theory or the "Balanced Stakeholders Economic Development" Theory

The Balance of Powers (BOP) or Balanced
Stakeholders Economic Development (BSED) Theory: A critic of capitalists
and socialists economic theories. Is there an optimum balance between
private and public interest? How to balance between self-interest and the
society? How social interests can help individual interests and vice versa?
Finding a framework to resolve the conflict of interest.

Who is better at energizing the virtuous economic cycle? The
government officials or the private sector?

How the partnership and alignment of interests between
private and public sectors is critical to sustaining the virtuous economic
cycle? How the misbalance of power between the government and private sector
can result in enforcing the forces of the vicious economic cycle? Case
studies of how elites of nations contributed to the growth and decline
of their national empires.

The myths of free market theory? Case studies of how
lack of regulation can be as bad as over-regulation?

How imposing higher taxes on the wealthy can be as bad as
ignoring the socioeconomic development of the lower economic classes? Should
the government be responsible for the distribution of wealth or be limited
to facilitating the growth of all economic classes? How to validate the
position that the government role should be to prevent the abuse of the poor
by the rich and the rich by the poor? Are there alternative methods to
eliminate economic growth barriers to lower income population? A case study
in microfinance and the role of the government "Good Bank"?

Can we attain a sustainable balanced economic growth? How
social development can enforce or hinder economic development and vice
versa? The need for a new socioeconomic development framework (GNW vs.
GNP)?

What are Executive White Papers?

White papers provide businesses and
government leaders with a list of questions, terminologies and discussion-points
that can be used to address emerging challenges and opportunities. Unlike
academic research papers, white papers are succinct work documents
designed for communication and problem-solving by the leadership team. The
structure of the white paper includes three main sections: 1). A statement of
the problem or opportunity 2). Analysis of root causes and driving forces 3).
Proposed solution and implementation best practices.

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